Investor Glossary-cost basisInvestor Glossary-cost basisInvestor Glossary-cost basisInvestor Glossary-cost basisInsightful stock market charts - Click here
investor
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Cost Basis

The HTML to link to this page
 

Cost basis reflects the true cost of purchasing a financial asset held over an extended period of time. The longer a stock or other asset is held, the higher the probability that the original purchase price will need to be revised in order to reflect adjustments such as future purchases, stock splits, and dividend payments. For assets purchased in several transactions, the initial cost basis is the average cost from all transactions. If a stock splits, the original cost basis is adjusted downwards. For example, in a two-for-one split the new cost basis is the old cost basis divided by two. A reverse stock-split, where the number of shares outstanding is decreased, will also increase the cost basis. Cost basis can also increase if a dividend is reinvested. In this case, the cost basis goes up to reflect the increased investment. Using an incorrect cost basis can have significant tax implications as it affects the calculation of taxable profits.



Rate this cost basis definition...

Learn about investing with the Investor Glossary Term of the Day


Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.


Popular Terms: inflation, stock split, required rate of return, 144a, option premium, VIX, class C shares, implied volatility, diluted share, average price per share, APR, risk management, deferred revenue, LIBOR, limit order, deferred tax, real GDP, ex-dividend, current ratio, annual return, minority interest, 1031 exchange, stock market close, FICO score, labor relations, per diem, retained earnings, quality assurance, ex-dividend date, FTSE, debt service coverage, liquidity ratio, 401a, command economy, dividends payable, Key Rate Duration, Zero Cost Collar, irrevocable trust, balance sheet, reverse mortgage, open position, 1035 exchange, phantom income, covered put, cancelled check, in escrow, EBITDA, wholly-owned subsidiary, margin rate


Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Home | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2016 Investor Glossary - All rights reserved - Terms of Use